Utah Administrative Code
The Utah Administrative Code is the body of all effective administrative rules as compiled and organized by the Division of Administrative Rules (see Subsection 63G-3-102(5); see also Sections 63G-3-701 and 702).
NOTE: For a list of rules that have been made effective since January 1, 2020, please see the codification segue page.
NOTE TO RULEFILING AGENCIES: Use the RTF version for submitting rule changes.
R339. Financial Institutions, Industrial Loan Corporations.
Rule R339-4. Authority for Industrial Loan Corporations to Issue Subordinated Capital Notes or Debentures.
As in effect on January 1, 2020
Table of Contents
- R339-4-1. Authority, Scope and Purpose.
- R339-4-2. Definitions.
- R339-4-3. Authority to Issue Capital Notes or Debentures.
- R339-4-4. Disclosure.
- R339-4-5. Use as Capital.
- R339-4-6. Exception to the Limits on Amounts of Subordinated Capital Notes or Debentures which May be Issued.
- Date of Enactment or Last Substantive Amendment
- Notice of Continuation
- Authorizing, Implemented, or Interpreted Law
(1) This rule is issued pursuant to Section 7-1-301(8) and 7-1-301(13).
(2) This rule applies to all industrial loan corporations.
(3) This rule construes, applies, and elaborates on Department of Financial Institutions Rule R331-5 as it applies to industrial loan corporations in the issuance of subordinated capital notes or debentures.
(1) "Affiliate" means any company under common control with the industrial loan corporation excluding any subsidiary.
(a) The following shall not be considered to be an affiliate:
(i) Any company engaged solely in holding the premises of the industrial loan corporation with which it is affiliated, and
(ii) Any company where control results from the exercise of rights arising out of a bona fide debt previously contracted, but only for the period of time specifically authorized by Rule R339-6-3(1)(j).
(2) "Capital" means the excess of an industrial loan corporation's assets over its liabilities detailed in the following accounts: capital stock, surplus, and undivided profits. Unpaid stock subscriptions are not part of capital.
(3) "Capital Stock" means the total of:
(a) the par value of all shares of the bank having a par value that have been issued; plus
(b) the amount of the consideration received by the bank for all shares of the bank without par value that have been issued, except that part of the consideration which has been allocated to capital surplus in a manner permitted by law; plus
(c) the amounts not included in Subsections (a) and (b) as have been transferred to stated capital of the bank, whether upon the issue of shares as a share dividend or otherwise; minus
(d) all reductions from such sum as have been effected in a manner permitted by law.
(4) "Company" means a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any form of business entity.
(5) "Control" means "control" as defined in Section 7-1-103.
(6) "Commissioner" means the Commissioner of Financial Institutions.
(7) "Department" means the Department of Financial Institutions.
(8) "Institution" means "institution" as defined by Section 7-1-103.
(9) "Parent" means any company which controls the industrial loan corporation.
(10) "Person" means "person" as defined in Section 7-1-103.
(11) "Other evidences of debt" means notes payable, bonds, subordinated capital notes or debentures, maturing within one year, mortgages payable, accrued interest payable, and all other debt obligations, but not including any evidences of debt which involve a full recourse commitment where the department can readily ascertain that the person making the commitment is fully able to honor the same.
(12) "Subsidiary" means "subsidiary" as defined in Section 7-1-103.
(13) "Surplus" is a capital account which includes the amount received by an industrial loan corporation for its capital stock in excess of the par value of the stock, or, in the case of stock without par value, the amount designated as surplus of the total amount received for its capital stock. Surplus may also include amounts received as capital contributions. Amounts may also be transferred to the industrial loan's surplus account by the board of directors from undivided profits.
(14) "Total Capital" means the sum of capital, reserve for contingencies, reserves for loan losses, and the principal outstanding amount of subordinated capital notes or debentures not maturing within one year.
(15) "Undivided Profits" is a capital account representing the industrial loan corporation's capital in excess of its capital stock and surplus accounts. The amount represented by the undivided profits account may arise from net earnings of the industrial loan corporation or out of capital funds paid into the industrial loan corporation in excess of the capital stock and surplus accounts. Undivided profits may be used to absorb losses of the industrial loan corporation, for payment of cash dividends to stockholders or for transfer into surplus, upon appropriate resolution of the industrial loan's board of directors.
(1) Any industrial loan corporation may, with the approval of the stockholders owning two-thirds of the voting stock of the institution, or without the approval if it is authorized by its articles of incorporation, and if it has demonstrated sound performance and efficient management, apply to the commissioner for permission to issue convertible or non-convertible capital notes or debentures, subordinated to the claims of all certificates of deposit, deposits and savings accounts and all other creditors.
(2) The commissioner may grant approval for the issuance of subordinated capital notes or debentures in the amounts and under the terms and conditions as he shall deem appropriate, provided that:
(a) All relevant provisions and conditions of Rule R331-5 issued by the department have been complied with; and
(b) The principal amount of the subordinated capital notes or debentures outstanding at any time shall not exceed 50% of the capital of the industrial loan corporation; and
(c) The new issue of subordinated capital notes or debentures have a weighted average maturity of not less than seven years; and
(d) Subordinated capital notes or debentures shall not be used as collateral for loans or extensions of credit made by the industrial loan corporation.
All subordinated capital notes or debentures issued by an industrial loan corporation shall have the following provisions made in the body of the note or debenture and these provisions shall be disclosed in either a bold face type or in a size of type which is larger than the type face used in the other provisions carried in the body of the note or debenture.
(1) This obligation is NOT insured by any agency of the United States or the state.
(2) This obligation is subordinated to the claims of all certificates of deposit, deposits and savings accounts and all other creditors.
(3) Subordinated capital notes or debentures shall not be used as collateral for loans made by the industrial loan corporation.
(4) Items (1) and (2) listed above shall be prominently disclosed in all advertising of capital notes or debentures.
(1) The outstanding principal amount of subordinated capital notes or debentures not maturing within one year shall be added to the capital of the issuing industrial loan corporation for the purpose of determining the amount of "total capital" under the provisions of Sections 7-8-5(1) and 7-8-14 and Rule R339-6.
R339-4-6. Exception to the Limits on Amounts of Subordinated Capital Notes or Debentures which May be Issued.
Notwithstanding the limitations of Sections 3 and 5 above, subordinated capital notes or debentures assumed under a supervisory action or plan of reorganization pursuant to Sections 7-2-1 or 7-2-12, may, at the discretion of the commissioner:
(1) Exceed the 50% of capital of the industrial loan corporation limitation imposed by Sections 3(2)(b) above; or
(2) Include the outstanding principal amount of subordinated capital notes or debentures maturing within one year in the capital of the industrial loan corporation for the purpose of determining the amount of "total capital" under the provisions of Section 7-8-14 and Rule R339-6.
September 22, 2017
For questions regarding the content or application of rules under Title R339, please contact the promulgating agency (Financial Institutions, Industrial Loan Corporations). A list of agencies with links to their homepages is available at http://www.utah.gov/government/agencylist.html or from http://www.rules.utah.gov/contact/agencycontacts.htm.